Privatization, market deregulation and the ongoing rise in demand for energy are presenting major opportunities for private equity investment in the region’s energy sector, according to the CEO of a leading specialist investment firm.

On the eve of the Private Equity International Middle East Forum 2007 Adil Toubia, Chief Executive Officer, GCC Energy Fund, commented on the market changes that are opening up new avenues for investment in upstream, downstream, midstream services, the power sector and alternative energy.

Last year in the United States, 183 companies in the energy sector received US$1.8 billion in private equity investments, according to the 2007 MoneyTree Report by PricewaterhouseCoopers and the National Venture Capital Association.

While private equity investment in the Middle East was much lower by contrast, it is showing impressive growth and is set to expand exponentially. “The private equity industry in the Middle East has matured significantly over the past two years, with a number of funds demonstrating their capacity to operate as responsible partners that help develop the operations of privately-held firms,” says Toubia.

“At the same time, the energy industry in the Middle East is becoming increasingly open to private equity investment, particularly as the sector moves further towards privatisation and as more companies look for funds to enable them to compete on an international level,” he added.

As the region’s first private equity fund focused on the energy sector, the firm has already demonstrated the range of opportunities that exist across the value chain of the industry, as evidenced by its diverse portfolio.

Since November 2006, the firm has announced strategic investments in Maritime Industrial Services; the purchase of a 50 percent stake in Stellar Energy (MENA); the acquisition of a controlling interest in Oman’s Dhofar Power Company; and the purchase of a 33 percent equity stake in The Gulmar Offshore Group.

All of these companies have been able to embark on growth and development strategies through the additional resources provided by The GCC Energy Fund.

The fund has benefited significantly from the strong track record within the energy industry of its senior personnel, which enables it to share expertise with its partner companies, and also track the development of the market.

“Because of the surge in both construction levels and population numbers in the Middle East, the demand for energy continues to rise. As the first specialised fund in the energy sector, we have begun to demonstrate both the positive impact such investments can have on regional companies in the energy sector, as well as the potential for superior returns” concluded Toubia.

The GCC Energy Fund was launched in 2005 as a private equity fund focused on making investments in companies and projects across a range of industries within the energy sector.